In this insightful interview, Adeeb Ahamed, managing director, LuLu Financial Holdings, vice chairman, FERG (Foreign Exchange and Remittance Group), delves into the driving force behind the establishment of FERG and its significant role in the development of the cross-border payments sector in the UAE.
FERG aims to unite all remittance and foreign exchange companies, foster compliance with regulatory requirements, embrace digitalization, and contribute to the UAE’s position as a prominent global financial center. The company also aims to be a think-tank and a platform for knowledge sharing, research, and collaboration with other industry bodies, financial services, banking, and regulatory entities.
What has been the driving force behind the establishment of FERG?
The UAE is the world’s second-largest market for outbound remittances and FERG was established in response to this pivotal role: to unite all remittance & foreign exchange companies and contribute to the meaningful development of the cross-border payments sector.
By forming FERG we want to ensure that we do not lose sight of the core purpose of the cross-border payments industry and its values. We wanted to do this by creating a think-tank that would not just be a source of knowledge sharing & research, but also act as a platform to connect with other industry bodies across the financial services, banking and regulatory landscape.
This vision has helped FERG make remarkable strides since its inception and our members are committed to collectively addressing industry challenges in areas of regulatory compliance, digitization, and AML/CFT among others.
Moreover, the sense of collaboration which we envisaged early on encourages innovation, helping our members deliver exceptional services to the people of the UAE.
We are quite optimistic about what the future holds for the sector, and we want to keep this spirit alive through constant member interactions, as well as engagement sessions with regulators and other stakeholders of the payments ecosystem.
With the ongoing digital transformation in the financial industry, how has digitalization impacted the remittance sector over the past years?
UAE’s remittance sector has always been at the forefront of adopting technology and innovation, leveraging these advancements to streamline various aspects of compliance, enhance customer experiences, improve operational efficiency, and reduce transaction costs.
The ongoing digital transformation efforts have yielded positive results, particularly with major companies introducing their mobile payment apps and crafting seamless digital user journeys that combine the advantages of their physical network with the flexibility of digital services.
Digitization has further proven to be a game-changer by substantially lowering transaction costs, creating a win-win situation for both service providers and customers. Moreover, it has streamlined the customer onboarding process, making it much more convenient and hassle-free.
As a consequence of these positive outcomes, remittance companies are now exploring opportunities to collaborate with banks and third-party service providers, embracing the applications of open banking. Such partnerships aim to unlock new avenues for the sector, while allowing companies to provide enhanced services and offerings to customers.
What is the future of the remittance sector? Where do you see it heading?
The cross-border payments landscape is undergoing a major transformation, with innovation impacting transaction processing time, mediums of transactions and customer experience. The regulatory landscape will play a crucial role in shaping the sector’s progress, with greater acceptance of open banking applications eventually driving revenue-generating partnerships.
One key development will be the interoperability of cross-border clearing systems or payment rails such as UAE’s IPP, India’s UPI, Singapore’s PayNow, UK’s Faster Payments, etc., enabling seamless two-way communication akin to intra-country money transfers. This advancement will make transactions more affordable and reduce processing time significantly.
Central Bank Digital Currencies (CBDCs) are also expected to gain greater acceptance for cross-border payments, providing customers with a choice of digital or physical mediums to send money. This trend will lead to the rise of more Money Transfer Operators (MTOs) building hybrid operational networks.
Furthermore, the demand for integrated and intuitive financial services solutions driven by AI is on the rise, appealing particularly to the emerging GenZ demographic who seek mobile-first, integrated solutions that allow smart and reliable money transfers into prepaid cards or e-wallets, regardless of geographical barriers.
Stablecoins are also emerging as an ambitious goal for a borderless, one-currency system. However, addressing AML/CTF regulatory concerns remains essential, and substantial usage in both the ‘send’ and ‘receive’ countries is vital for their widespread adoption.
Ultimately, the future of cross-border payments will likely encompass a mix of instruments, including traditional fiat currencies, CBDCs, stablecoins, and cryptocurrencies. The dynamic interplay of these elements will shape the future of cross-border transactions and redefine global financial interactions.
What strategies does FERG employ to ensure compliance with regulatory requirements and mitigate risks associated with foreign exchange and remittance operations?
As a leading industry body, FERG remains wholeheartedly committed to fostering a culture of compliance that aligns seamlessly with the regulatory requirements set forth by the Central Bank of the UAE (CBUAE). Our dedication to this objective is evident through the implementation of robust and advanced training programs, as well as regular member meetings aimed at sharing best practices. Additionally, we actively engage with regulators and law enforcement authorities, seeking to understand their expectations for the industry and its pivotal role in upholding the UAE’s positive image on the global stage.
Over the past 12 months alone, FERG has demonstrated its proactive approach by conducting an impressive 130+ workshops, effectively training over 10,000 people on a diverse range of topics. These training sessions cover crucial areas such as AML/CFT, counterfeit currency prevention, fraud prevention, risk management, and ethics & integrity. Our firm belief in the significance of standardized practices is reflected in the release of three versions of AML Standardization Manuals, further reinforcing our commitment to compliance.
FERG also actively collaborates with UAE’s law enforcement agencies by participating in investigations concerning financial transactions and anomalies. Over the last one year itself, we have shared over 500 fraud alerts and 1,000 inquiry emails alerted to us by relevant authorities among our members.
This cooperation is vital in maintaining the integrity and security of financial services within the UAE.
In recognition of our dedication to collective progress, FERG’s senior management regularly participates in the roundtable conferences organized by various industry forums. These forums are crucial networking opportunities where we share knowledge and educate ourselves on the prevalent standards and best practices in the UAE, and those being followed at a regional and global level.
Furthermore, as a responsible industry body, FERG strongly supports the country’s Emiratization program, actively fostering initiatives to train and introduce more Emiratis to member exchange companies. We firmly believe in nurturing local talent and empowering Emiratis to play an active and impactful role in the financial services sector.
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How does Foreign Exchange & Remittance Group envision its contribution to further strengthening UAE’s position as a prominent global financial center?
The UAE undeniably stands as the financial hub of the MENA region and a prominent global center for financial services. With unwavering determination, the country has been addressing all aspects of its financial processes to enhance its Financial Action Task Force (FATF) ratings and earn recognition for its secure and transparent cross-border payment systems.
FERG fully comprehends the significance of this endeavor and envisions our contribution as crucial to the success of the payments sector.
We maintain constant communication with the relevant authorities, collaborating closely to establish resilient compliance systems and heed the guidance of the CBUAE.
We also believe that establishing the UAE as a global financial center will require significant contributions and support from various stakeholders of this ecosystem, including technology providers.
As a proactive step, we are continuously working to expand our membership base and welcome new members into our fold. This approach enables us to capitalize on the strengths of our individual networks and synergize efforts for the greater benefit of the UAE’s global standing in the financial services sector.
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